Annual incomes in cities such as Beijing and Shanghai now average more than $1,000 (£560) per person, while rural incomes have remained at about $370.

This has led to a growing number of popular protests in rural areas, and significant population movements into the cities.

From next year citizens will not have to pay income tax if they earn less than 1,600 yuan ($200; £112) a month.

Previously only those earning less than 800 yuan a month were exempt.

'More harmony'

Officials said local authorities would not be allowed to alter the arrangement.

Lou Jiwei, head of the State Council Financial and Banking Office, said some people had hoped the new cut-off level would have been even higher, but that this was not possible.

"If we did that, the fiscal revenue would fall too far," he said.

China's Five-Year Plan for National Economy and Social Development is expected to put greater emphasis on improving social services rather than the fast-growth model that Beijing has emphasised in the past.

President Hu Jintao has himself admitted that China needs to build a "more balanced and harmonious society".